×

'Misguided' banks need internal overhaul: Influential Group of Thirty economists

Certain financial institutions need to reform internal culture and meaningfully punish wrongdoing to better serve consumers and drive profits, a new report contends.

The assessment released Thursday from the Group of Thirty—which includes influential former central bankers, financiers and academics—said some firms are "misguided" in seeing accountability mostly as a means to avoid legal issues and fines rather than to ensure stability. The organization calls on banks to set better standards while cutting compensation for employees who fail to meet them.

"Banks need to restore the primacy of serving customers to help them achieve their financial goals, and of serving the communities and economies in which they operate," the report said. "Many leaders and banks are already engaged in this important endeavor."

73897528BV007_UK_Pound_Rise
Getty Images

The financial industry has faced a tougher regulatory environment since the 2008 financial crisis, and many large firms have decried what they see as an unnecessary increase in enforcement and fines. But rather than attempting to dodge punishment, banks should focus on "repairing trust" with the public, which will in turn boost financial performance, the report contended.

Read MoreDodd-Frank reform has helped, Frank says, even without bank break ups

It calls on banks to develop staff and hire new employees with transparency, accountability and diversity in mind. The organization also recommends reviews and possible financial punishment for hundreds of top officials at large firms, including chief executive officers.

"Boards should ensure that the CEO and executive team are highly visible in championing the desired values and conduct, and that they face material consequences if there are persistent or high-profile conduct and values breaches," the report said.

The report stressed that a firm and its board should set and enforce standards, but outside officials can have an "important" role in monitoring them.

Read MoreHere's what's going on with the Dodd-Frank Act